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Rahm Emanuel borrows presidential approach to tackle budget mess

Updated: September 24, 2012 6:25AM

Faced with an operating deficit he now says could approach $700 million, Mayor-elect Rahm Emanuel on Wednesday adopted a model that has helped two U.S. presidents confront financial crises.

Emanuel is creating a new Mayor’s Economic, Budgetary and Business Development Council packed with private sector wizards who specialize in privatization, mergers and acquisitions and cost-cutting.

“The choices are between bad and worse. What I want is somebody who will present to me two or three [or] four options. What are the trade-offs? What is the up-side? What is the risk?” Emanuel said.

“The challenges we face are daunting. A new comprehensive approach is necessary. I want and need this council’s help and advice. … I’ve seen it work for presidents — two of ’em — and I wanted it for the mayor given the scope … of the challenges the city faces.”

Pressed to identify the city’s operating deficit, the mayor-elect joked, “You’ll need two pillows when you sleep tonight.” He then pegged it at “somewhere between” $500 million and $700 million. That would bring the annual structural deficit, including unfunded pension liabilities, to $1.2 billion.

The new group charged with “re-inventing” city government and promoting economic growth will be chaired by former RR Donnelley CEO Mark Angelson, who has agreed to serve as Emanuel’s $1-a-year deputy mayor.

Angelson will lead a high-powered economic team that also includes Chief Financial Officer Lois Scott, Budget Director Alexandra Holt, City Comptroller Amer Ahmad and Chief Technology Officer John Tolva.

Their first order of business is to pinpoint the $75 million in cuts that Emanuel has promised to make to Mayor Daley’s final budget.

After that, the council will conduct a top-to-bottom review of city departments to determine what services can be cut or privatized and what services Chicago can continue to provide, but at reduced costs.

Since Emanuel did all the talking, it was impossible to determine what course the new council will chart. But judging from members’ individual track records, the possibilities are endless. Union leaders could be in for a rough ride.

Angelson is a mergers-and-acquisitions specialist who presided over a major consolidation of the printing industry during a four-year stint as CEO of Chicago-based RR Donnelley.

Scott co-founded a firm that provides strategic financial advice to state and local governments across the country.

Holt is an attorney specializing in infrastructure privatization who advised the group that tried to acquire Midway Airport before the deal collapsed for lack of financing.

Emanuel campaigned on a promise to cut the city’s annual garbage collection costs by as much as $65 million by implementing a four-step process that could end in at least partial privatization.

He also talked about implementing a health and wellness plan for city employees that uses incentives to drive down costs by as much as $240 million over four years.

On Wednesday, he refused to say what services would be privatized or eliminated. He would only say, “You can no longer avoid some of the choices we have to make.”

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